NAR applauds new credit scoring system

The nation’s dominant credit-scoring system is being revised in a way that could improve credit scores for many consumers.

FICO introduced its new FICO Score 9 as a way to assess consumer collection information, bypassing paid collection agency accounts and differentiating between medical and non-medical collection agency accounts.

The revisions, to take effect this fall, will alter the formulas used to generate the credit grades used in more than 90 percent of the decisions that lenders make about how much consumers can borrow and at what interest rates.

As a result, median FICO scores for consumers whose improved scores could make it easier to qualify for mortgages and car loans and get lower interest rates.

The National Association of Realtors® (NAR) applauded FICO Score 9. “This move will ultimately make a real difference in the lives of millions of Americans, who have been shut out of the housing market or forced to pay higher mortgage interest rates because of flawed credit scores. Since the housing crash, overly restrictive lending has been the greatest obstacle to homeownership,” NAR President Steve Brown said in a statement.

“NAR will continue to support efforts to broaden access to credit for qualified homebuyers,” he added.

Experts cautioned, though, that borrowers might have to wait a year or more to see the effect of changes because lenders will not quickly overhaul their systems to evaluate consumers and price loans for them.